December 20, 2000, 11:13 AM — Anywhere you look, MCI WorldCom and Sprint have a massive integration job ahead of them.
Before the Sprint merger agreement, MCI WorldCom favored moving its Nortel Networks-based legacy MCI frame relay network to a Lucent platform because the legacy WorldCom network and MCI WorldCom's UUNET heavily rely on Lucent's frame relay switches. But Sprint's fully redundant dual networks run on Alcatel and Nortel switches; so the merger only compounds this problem.
Lucent was absolved of contributing to MCI WorldCom's August frame relay outage, so CEO Bernard Ebbers could still choose to revive the single-network plan. But he'd be wise to retain Sprint's dual-network philosophy.
The status of the combined company's ATM nets is similar. Sprint uses NEC ATM switches for core transport of all its data services but relies on Nortel and Hitachi switches at the edge. The legacy MCI Newbridge Networks-based ATM network is not compatible with Lucent frame relay switches capable of supporting Multi-protocol Label Switching, so MCI WorldCom has planned to migrate legacy MCI customers to its chosen ATM equipment vendor - Cisco. I anticipate that the merged carrier's net will heavily feature Cisco and NEC switches.
The firm faces yet another challenge with its 'Net assets. If the new WorldCom decides to retain Sprint's IP net, I'd say UUNET's market strength would require Sprint's current 460+ routers to be migrated to a UUNET-compatible architecture no later than six months after the merger's completion.
The merger provides MCI WorldCom with an opportunity to integrate the best networks, operations and talent from the three carriers. But the merger requires recognition that MCI WorldCom's current operating philosophy and execution have to radically change if the firm is to successfully compete against AT&T. Has Ebbers seen the light? I'm skeptical but welcome being proven wrong. Regardless, the merged carrier will have far too much capacity and will divest itself of up to 20% of existing data and 25%to 30% of its circuit-switched assets.
Even perfect execution of a stellar plan takes time, and AT&T and WorldCom will not have viable business-class nationwide competitors for the time being. In the interim, price, quality and innovation will lag, and enterprise customers should divide primary service coverage between these two carriers. Although this is more costly than bundling everything with one provider, the absence of a "third wheel" makes it the only way to diversify risk and keep both AT&T and WorldCom on their toes.